مطالعات تجربی حسابداری مالی (Sep 2011)
Evaluating the Power of TOC- Based Criteria in Measuring None Performing Loans Consequences
Abstract
Financial performance has always been considered by researchers. Finding Indexes that proven theoretically and empirically is a great challenge in this area. One of the new models of performance evaluation is “Throughput Accounting” based on the theory of constraints. This theory provides measures aims to generate cash in the present and future with focus on drum (bottleneck) management. There seems non-performing loans to be the major banking system bottleneck that affects banks performance through multiple channels. Due to the different nature of banking operations, it is expected that Throughput Accounting approach can be more efficient to show non-performing loans consequences.This study examines the relationship between performance evaluation criteria based on theory of constraints and the rate of non-performing loans. Other performance evaluation criteria (include traditional, economic and) have been examined to choose the most appropriate repressors. We use several panel regressions for financial data of 19 Iranian banks during 2006 - 2010. Then the explanatory power of alternative models was compared using vuong’s non-nested model selection test. The results show that performance evaluation criteria based on theory of constraints have more explanatory power than other conventional indices in explaining non-performing loans rate. It is recommended to evaluate the performance of Iranian banks based on the rich concepts of Throughput Accounting.
